Archive for the ‘Stock Market’ Category

The Dow Jones Industrial Average and the S&P 500 both ended at their highest levels since 2008, before the Lehman Brothers collapse.
This was largely a reaction to the Federal Reserve’s decision to buy more than $600 bill of additional debt from the Treasury, commonly called round two of Quantitative Easing (QE2).
Another result was a drop in the dollar: the US Dollar Index dropped below 76 for the first time since last December.

A recent Bloomberg article details Google’s corporate structure, which moves revenues to subsidiaries in low-tax countries such as Ireland, Bermuda, and the Netherlands, with the result of reducing corporate taxes in those countries that are their largest markets: the United States and United Kingdom.

Google’s not alone, of course. Both Facebook and Microsift use similar tax structures, and a US Treasury measure to tax monies moved between international subsidiaries was halted by what we’ve come to know as the “political process”:

Treasury officials, who estimated the policy change would raise $86.5 billion in new revenue over the next decade, dropped it after Congress and Treasury were lobbied by companies, including manufacturing and media conglomerate General Electric Co., health-product maker Johnson & Johnson and coffee giant Starbucks Corp., according to federal disclosures compiled by the non-profit Center for Responsive Politics.

Bloomberg is reporting that so-called “QE2″ may be contagious this week, as Central Banks engage in a race to the bottom for their respective currencies:

fallout from the Fed could cause Bank of Japan Governor Masaaki Shirakawa to do more for his economy and Bank of England Governor Mervyn King to leave the door open to more aid. Even as European Central Bank President Jean-Claude Trichet holds the line against inflation, he may eventually change course if the euro surges, while emerging markets are already acting to restrain currencies.

This bodes well for nominal asset prices in the short term: stocks, commodities, metals… But the long term inflation repercussions could wipe out real gains in the process. Pricing in these rounds of “Quantitative Easing” is not for retail investors.

The Dow and S&P 500 closed the week at 8378 and 876, respectively, down 5% and 7% for the week. The Nasdaq fell 9% this week, an indicator that Google’s earnings surprise is not going to heat up the entire sector.

Analysts are saying that Emerging Markets are likely to get the worst of this recessoin, since their credit rating is poorest to begin with.

As always, we are stressing solid, dividend-paying companies with histories of growth through the recession: PG, JNJ, GPC. A small position in SDS or SKF or SRS will offset downside risk and, since these funds work on a double-inverse of their respective indices, they require less upfront investment to reap the benefit.

This market is highly volatile and too risky to predict. Traders must be nimble and willing to cut losses quickly or take the long-term (5+ year) view. Fortunes will be made and lost over the coming weeks, as the only thing we know for sure is that the volatility is here to stay.

Since October 1, the Dow has lost 20.9% of its value, a dramatic loss for the U.S. Markets.

GM is trading at 1950 levels, as investors are unsure of its ability to raise enough capital to cover its operating costs over the next 18 months.

Foreign markets have been no safe haven, as ost have seen titanic losses over the past weeks.

This weekend’s meeting of the financial officials for the G7 countries may end in some short-term relief, but there is clearly no confidence in the leadership at this time. Investors are mostly finding Treasuries as safe-havens agains steep losses.

Keep in mind that there are buys out there. Strong companies that with historically strong dividend growth that deal in Consumer Staples should outperform the market, and a short-biased ETF can help reduce volatility, when used sparingly. A very small position (extremely small, as these are very volatile) in SKF (Proshares Ultrashort Financials) or SDS (Proshares Ultrashort S&P 500), coupled with strong-performing, dividend-paying stocks should do well in this market.

He is a professor of economics at New York University’s Stern School of Business, and he is highly sought after for his advice by think tanks and politicians.

He started talking about the U.S. national debt in the nineties. He started talking about the housing bubble in 2004. He started talking about the credit crunch in 2005.

He’s on top of things in a way that most of us, who work too many hours per week to adequately inform ourselves, can be.

His online service, RGE Monitor (short for Roubini Global Economic Monitor), is available at rgemonitor.com, and it contains a number of useful, if controversial, points of view about the current state of our economy.

Usually he offers his premium service for hundreds of dollars per year.

During this economic crisis, premium services at rgemonitor.com are free.

We are in no way affiliated with Nouriel Roubini or rgemonitor.com, and we only see this as a way to educate our readership in a way that we are not capable.

The legislation currently running through the U.S. Congress will need additional legislation to make it work for the long term. The Paulson Plan is a short-term solution, which will be ineffective come January 20, 2009, when we will have a new president and a new Congress.

It is of unequivocal importance that our citizens take the time to educate themselves about the oncoming economic crisis that this bill is prolonging (not avoiding, but prolonging).

The first step in educating yourself is getting acquainted with Nouriel Roubini’s ideas, particularly his HOME plan, which combines relief for lenders (banks, investors), as well as homeowners.

As web publishers, there are a lot of things we want our readership to do:
â€” Make good financial decisions about their futures and retirement
â€” Sign up for brokers we recommend
â€” Retire comfortably and early
â€” Protect their nest eggs so that they have something to pass on to the next generation

As citizens of the United States, however, we want our readership to educate themselves about the dangers of the credit markets that are looming beyond bad mortgages.

The crises we’re now experiencing are only symptoms of larger problems described by Mr. Roubini.

We do not make recommendations on stocks, or mutual funds. We just report what’s going on.

This is our first recommendation since our founding in early 2006:

Signup for rgemonitor.com now, while it’s free.

It is an unprecedented opportunity to educate yourself on the potential crises ahead, and an outline for how to protect yourself and your assets during these difficult times.

The Senate passed the Paulson Plan (modified, of course) by an overwhelming majority Wednesday night.

The revised bill contains an increase in the FDIC insured limit from $100,000 to $250,000, ensuring that both presidential candidates can take credit for it. It is, no doubt a long overdue provision, but it was not the idea of either of them.

The bill will move on to the House, where it failed earlier. With such strong Senate approval, the bill will likely pass, despite strong public opposition.

In any case, the markets are poised to rise on this news. The bailout is good news for Wall Street, even if only for a short time.

Long term investors and those nearing retirement will want to look at this as a bup in the road, a bump upward. It may be best to look at strength in the market as a selling opportunity, or a short opportunity.

With the late night and weekend announcements made over the past few months, it is becoming increasingly popular to time the market with short funds, like ProShares Ultrashort S&P 500 (SDS and UltraShort Financials (SKF).

When good news like the Senate passage happens, financials, and the market in general, are bound to react strongly, sending short-focused ETFs downward.

Whether the underlying problems in credit and the economy in general are solved, however, remains a question: what if $700 billion isn’t enough?

There’s a lot of upside to this bill’s passage, but there’s a lot of downside in its wake.

After a tumultuous week that saw two sharp dips in the Shanghai Index, Tuesday saw the market end in positive territory, after being down 7% earlier in the trading day.

What gives?

Investors in China and other emerging markets should be aware that these are high-risk investments, and therefore will experience higher volatility than investments in the more mature markets of Western Europe, North America, and Japan.
The recent dips experienced in Shanghai are the direct result of a change in China’s taxes on stock investments. The change was implemented to detract speculators from high-risk short-term investments. It is the first step in the maturity of China’s Finance Ministry, which is implementing long-term solutions to the rapid business development issues the country is facing.

Though it is likely that highly volatile days like the ones we have seen will happen again in China, the long-term trend should remain positive, as its development is just underway.